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All In: Devon Energy is Banking on a Rebound for Anadarko

Devon Energy Corp. intends to take advantage of its position in the Anadarko Basin to drive its cash return model. The company also intends to position itself as the leader for ESG within the industry.

The reason behind this move is simple: top management at Devon believes that the Anadarko Basin is a hidden treasure.

The number of rigs has increased by 180%, and production per rig is up. Technological advancements, longer laterals, and optimized completions are driving this trend. As the company has been in Anadarko all along, Devon will continue planning for the 300,000 net acres that they currently have within this basin, while others only becoming familiar with it at the moment.

Devon is implementing its cash return model when it comes to developing Anadarko Basin, which includes five key components — moderate growth, reduced investment rates, low leverage, fixed-plus-variable dividends, and ESG excellence, which generated $550 million in free cash flow by itself in 2021 alone.

Consequently, the Oklahoma City-based independent E&P company plans to drill 45 new wells in the Midcontinent by 2022, as well as to produce 600,000 boe/d across five operating basins, including the Eagle Ford Shale, Permian, Powder River, and Williston basins.

According to Aaron Ketter, a vice president at Devon Energy, Devon's approach to technology development is long-term. It is based on a consistent allocation of capital. These policies have been in place for decades. Data access, standardization, and trust form the foundations of this system. In line with this, technology teams and field teams, as well as vendor teams, are continually seeking net-zero improvement. Right now, that means using three different sensors to monitor emissions continuously — fixed cameras, a long-range laser network, and aerial laser surveys — to catch any harmful carbon or methane emissions.

Technology advances are bringing about a step change in the transition to observed emissions reporting. Devon will also work with agencies and NGOs in this regard, to conduct research and provide external reports. A preventative phase, methane fees, and carbon tax ensure the company does not become compliant, that any leaks are discovered as soon as possible, that they are fixed quickly, and that compliance is avoided.

However, it remains to be seen whether or not this strategy will produce the necessary results. We should note, however, that Devon Energy, Corp. (DVN) shares have surged 30.7% just this year alone amid recent macro uncertainties and rising energy prices. On both the topline and bottomline, Devon's recent fourth-quarter results were better than Street estimates.

Revenue increased by 233.8% to $4.27 billion, exceeding estimates by $1.04 billion. Earnings per share of $1.39 exceeded consensus by $0.15. Production growth in the Delaware basin and an increase in margins drove this performance. As of the end of the quarter, the company's total production averaged 611 thousand oil-equivalent barrels (Boe) per day.

It appears that they are doing something right, at least for the moment.

And as always, if you wish to learn more about basin development or glimpse some insights about net-zero production, contact our Houston sales office or SCHEDULE A DEMO to learn how Rextag can help you leverage energy data for your business.

Tel. +1 713-203-3128

Email: treitmeier@hartenergy.com

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Merger of Equals: Whiting and Oasis $6B Deal

The two Bakken shale producers announced in a joint statement on March 7 that they had reached an agreement to unite in a $6 billion "merger of equals." Combining these two companies will create a leading Williston Basin position with assets covering approximately 972,000 net acres, production of 167,800 boe/d, and an enhanced free cash flow generation that will generate capital returns to shareholders. A historic collapse in oil prices prompted both Whiting and Oasis oil companies to file for Chapter 11 bankruptcy protection in 2020. Thus, the merger can be viewed as a preventive measure to avoid going out of business.

By purchasing the gathering and processing assets of Trace Midstream, Williams' existing footprint gains expanded capacity in one of the nation's largest growth basins, bringing its Haynesville gathering capacity to over 4 Bcf/d — increasing more than 200% from 1.8 Bcf/d. The deal also includes a long-term commitment from Trace and Quantum to support Williams' Louisiana Energy Gateway project (LEG), which is aimed to deliver responsibly sourced Haynesville’s naturalgas to markets along the Texas and Louisiana GulfCoast

Oil output in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. Additionally, gas productivity in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Given that this growth has been expected, recent global market changes make forecasting the output even more challenging. Learning how production will change is easier with early activity tracking, a new service recently launched by Rextag – Pad Activity Monitor. With the help of PAM, you are able to monitor well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days. Additionally, it cuts down activity reporting lag times by at least 98%, from 120-180 days down to just 5-8 days. In order to access reports, charts, tables, and mapping visualizations via Rextag’s Energy DataLink use a web-based application allowing users to filter, download and identify activity on a map or data table. Moreover, customers will be able to set up daily, weekly, and monthly email report notifications.

The EIA forecasts that total output in the main U.S. shale oil basins will increase 142,000 bbl/d to 8.761 million bbl/d in June, the most since March 2020. Oil productivity in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. In the largest shale gas basin, the productivity in Appalachia in Pennsylvania, Ohio and West Virginia will grow up to 35.7 Bcf/d in June, its highest since beating a record 36 Bcf/d in December 2021. Gas output in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Speaking of the Permian future output, putting hands on upcoming changes in production has recently been made easier with the new Rextag's service - Pad Activity Monitor. Thanks to satellite imagery and artificial intelligence, customers are able to monitor the oil and gas wells and are provided with near real-time activity reports related to drilling operations. However, it is noticed that productivity in the largest oil and gas basins has decreased every month since setting records of new oil well production per rig of 1,544 bbl/d in December 2020 in the Permian Basin, and new gas well production per rig of 33.3 MMcf/d in March 2021 in Appalachia.

No sooner had the crude prices soared above $100/bbl than the industry professionals believed in an incredible growth of drilling activity in North America’s largest shale patch. Analysts speculate that additional output of 500,000 barrels of oil daily would become a significant part (4%) of overall U.S. daily production. That is going to flatter oil and gasoline prices. Drilling permits in the Permian Basin are persistently growing, averaging approximately 210 at the beginning of April. Moreover, the permits trend is noticed as an all-time high as a total of 904 horizontal drilling permits were awarded last month. Nowadays, learning and analysing the current situation and predicting the future development become easier with early activity tracking, a new service recently launched by Rextag. Rextag's Pad Activity monitor (PAM) allows you to see well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days with the help of satellite imagery and artificial intelligence. While the increase in drilling will result in higher production, U.S. shale producers will have to overcome several hurdles including labor shortages and supply constraints.

2022 blog posts